Australian Housing Market Could See a Historic Crash

https://www.news.com.au/finance/economy/australian-economy/a...

Check above out. Looking like there will be a lot of house bargains in the next few years.

Comments

  • We've been hearing this year after year since the GFC. What's the difference this time?
    Every year, someone speculates there'll be a crash. It's probably not a question of "if", but a question "when".
    Who are you going to believe?

    • -16 votes

      This time it is different: interest rates at historic lows. When the increase it will be a huge % increase to cash flow. E.g. 1% increase on 2%.

      Check out US with Fed Reserve reducing interest rates after dot com crash and recession and see what happens - also led to subprime crisis.

      • This time it is different

        It's not like we haven't heard that one before!

        • -10 votes

          Do you just blindly listen to sayings or do you look at the logic behind it and try to understand it?

          • @ihbh: Most other articles in the past that has speculated the same thing provided some quite convincing logic too.
            On the other hand, there are other articles that predict the complete opposite. I assure you that they will have some pretty convincing logic behind their speculation also.

          • @ihbh: I'm not sure if it takes into account the herd mentality and the pollies trying to keep their investment property values high.

        • Your logic is just as flawed.
          Just because it hasn't happen yet doesn't mean it never will.

          • @Viper8: The reasons behind the fact that it did not happen are the same reasons behind why it will not happen. What those reasons are, if you ask me ?
            Too many tradies are depending on market value of houses going up ( build / renovate )
            Too many ( unqualified ) real estate agents depend on sales of ptoperties
            The taxes from buying ( Stamp duty ) are substantial
            The government prefers people "investing" in brick and mortar, instead of shares, and one way to obtain that is to artificially inflate house prices.

        • We haven't had a recession in 30+ years. So yeah… this one will be different. If you don't think so.. good luck to you. But the smart money is getting out of property now, there is no growth left to be had. Wages/rents can't sustain the absurd prices.

          • @field1985: My parents always remind me of the 18% interest days of the 90's crash. Not sure we'll see that again, but if it does I would hate to see the impact it would have on housing.

            • @Intoxicoligist: Your parent's really hold a grudge dude…

              Standard variable home loan interest rates hit an all-time Australian record high of 17.0 per cent in June 1989 and only stayed there until April 1990. It didn't even last 1 year, it wasn't 18% and it was over 30 years ago. They really need to get over it.

              The impacts of the current policy settings (NG/CGT/Franking Credit/Low interest rates/removing regulation/smsf's/etc/etc) are far worse for home ownership rates then 90's interest rates. Home ownership is at historic lows (only 29% actually own their home).

              Whole generations are being locked out of home ownership that will impact their entire lives. So forgive me if I dont have much sympathy for some home owners that cry poor because they had to pay high interest rates for a few months 30+ years ago.

              • @field1985: Oh I have 0 sympathy for them, both own their own houses now. I'm more talking about a generation of people my age (early 30's) getting into the property market during what seems like a low point, and then getting smashed by an interest rate hike, leaving them unable to make repayments.

                The current home ownership level is a joke. I make 100k a year and buying a house within 20-30 minutes commute to work (Brisbane CBD) is nigh impossible without a second income earner when looking at traditional 25-30 year mortgages.

                Renting is a suckers game, but it's the only game in town for me.

                • @Intoxicoligist: Please continue to rent.

                • @Intoxicoligist:

                  within 20-30 minutes

                  You have to be realistic. 20-30 minutes is basically CBD.

                  From door to door it takes me 1H, and I am probably one of the lucky one.

                  So if you want something to call your own, start to look at 1H+ commute, stop takeaway coffees and Squashed avocado bread. And, NO, It's not a new home, you will have to do a lot around and in the house. But that's Australia.

                  • @cameldownunder: Lol, I quite enjoy my takeaway coffee and squashed avo bread, but having worked in places with hour long commutes each way I tend to spend more on take away food rather than less (less time to shop, more exposure to opportunities to make impulse purchases), whereas living close to work I have time to make breakfast, do shopping, have a coffee at home then head to work by driving 5 mins around the corner (admittedly I lucked out with this job, its not quite CBD so I dont have to deal with massive traffic). Is paying 400pw in rent worth that? I could pay 400pw to a mortgage and increase my expenses a lot by moving an hour away from work, and reduce my quality of life.

                    I'm not interested in a new or big house. Heck, my ideal place is a 2 bedroom cottage from the early 1920s, but there aren't really many available close to where I am. The shittest and smallest house I've seen go up in the area went for 750k a few months ago.

                    That being said, work might be moving to Rocklea, in which case I dont know what I'll do. :/

                    • @Intoxicoligist: "That being said, work might be moving to Rocklea, in which case I dont know what I'll do. :/"

                      You'll probably be able to buy something within 20-30 minutes of Rocklea pretty easily at least! :D

                      Lots of new land being released in Doolandella and Pallara. You'll also be within 20-30 minutes of more affordable established suburbs such as Inala (yes it has a reputation, but I think it's somewhat overblown).

                      • @pangwen: I'm honestly more likely to stay northside and work in the CBD. I moved to where I am now before getting the job close by because I can get paid the most for my profession in the CBD. This job is a 3-5 year investment and I've barely finished 1, so it might work short term but not long term.

                • @Intoxicoligist: @Intoxicoligist 4 hours 46 min ago

                  That's bullshit right there… you're just aiming for super luxury, or have stupid expenses

                  Brisbane Property is often used for news articles, because you can easily get a house in Brisbane near the city for less than the price of a unit in Sydney

                  Brisbane/Queensland have the unique position of being very decentralised compared to the other cities. Resulting in lots of land and low property prices

                • @Intoxicoligist: "I'm more talking about a generation of people my age (early 30's) getting into the property market during what seems like a low point, and then getting smashed by an interest rate hike, leaving them unable to make repayments."

                  That's not a real risk, if you look at the global interest rate settings. A much greater risk for our generation is taking out a million $ mortgage, only for prices to crash and being left paying a million $ mortgage for a property worth $300-400k. So even if they sell, they will be left with a lifetime of debt.

                  The last time property prices truely crashed in Australia, it took 70 years for prices to return to those seen during the bubble. (Source)

                  I just want to buy a home (ample cash) and stop renting, but the risk of collapse is greater than the risk of missing out.

                •  

                  @Intoxicoligist: You don't have to live within 20-30 mins commute to work.

                • @Intoxicoligist: I don't know how interest rates will ever be increased without destroying the housing market. The RBA has dug a hole and there is no way out.

              • @field1985: I totally agree with you, but as long the government allows speculation and "Investment" properties, everyone that has not a house yet, is more and more likely to never be able to buy a house.

            • @Intoxicoligist: Since that time in the early 90's the RBA has been ordered to adjust interest rates to maintain Australia's Inflation Target of 2-3%.

              That policy has been in place for nearly 30 years under successive Labor and Liberal governments. There can be no guarantee that we will never again see double digit interest rates that we saw in the late 1980's, but it's a lot less likely as long as we have an RBA policy that's actively trying to prevent it.

              • @trongy: Didn't know that, TIL. I just dont know what to expect now that the interest rate is at a historic low. Its not like they can go lower now.

                • @Intoxicoligist: The cash rate will go to zero in the next 12 months.

                • @Intoxicoligist: Anyone with a mortgage should be considering a rate rise at some point and have room in their budget to accommodate it.

                  If you look at the historical interest rates for mortgages you will see that they grew over the 1980's. There wasn't a crash in house prices then because inflation was high and wages were growing roughly in line with inflation. Then in the 1990's there was an economic downturn. The interest rates remained high, but wages stopped growing. There were workers facing long term unemployment for the first time in their lives or if they found a job it was much lower paying than they were used to. That is when the property market crashed.

                  Earlier this year when COVID hit the government introduced JobKeeper and JobSeeker payment. The banks offered six months deferral on mortgage repayments (so called mortgage holidays). That was not because the goverment or the banks were being generous, it was in order to prevent a crash in house prices. Employment and wages are the key, not interest rates. If the economy doesn't pick up rapidly I think there's a real risk of a house price crash.

          • @field1985: The dumb* money

      • +24 votes

        The RBA has painted itself into a corner - it can now NEVER raise rates without crashing house prices.

        Most RBA board members and politicians own multiple investment properties, and they WILL look after themselves first.

        Rates are stuck at zero despite any inflation that might happen from the AUD crashing.

        • AUD is not crashing though

        • The australian government likes to pretend that the RBA controls interest rates. The worlds rates drive ours. Theres not a lot we can do.If USA/EURO rates go up ours will follow.

          • @surg3on: We're in a weird holding pattern until we get a vaccine for covid. Until then its going to be hard to determine the full impact of the downturn. We haven't had a disaster like covid in "modern" times and theres not any good models for what it does to the economy, or where we go from here.

            I agree that we're stuck with the worlds inflation rate, although we have a modicum of control over it, but given our trade ties to china and exports to the rest of the world, we're going to be stuck with a compromise at best.

            I'm lucky enough to be reasonably debt free (besides hecs) so I'm here for the ride more than anything else.

      • interest rates will only increase when the economy picks up. This means wages will be going up and people will be able to afford the increased loan repayments.

        • If interest rates increase 1% point from 2% to 3%, that's a 50% increase. Is everyone going to get that kind of pay rise?

    • +11 votes

      Yes but this one will be historic

    • Most of these predictions do so based on a faulty comparison to the US crash. They don't account for the differences in finance, markets demand or even pay. Australian property market definitely needs a bit of a correction but the doom and gloomers are unlikely to be right.

    • Housing was supposed to crash in 2000… and 2008/2009… and now 2020/2021.

      The housing crash is always six months away. Buy my 12 month course to see how you can profit from the imminent crash!

      • In fairness, just as many people sell, "Buy my course to see how you can profit from the boom!" courses.

        It's interesting how these people always advertise that they "escaped their 9-to-5 jobs" but seem to spend a hell of a lot of time organising, promoting and running their sham courses.

        But look at me, berating these Mother Teresa like figures, who being already independently wealthy are offering extremely expensive courses to others out of the goodness of their heart?

      • And nothing against you Cluster, I'm just so over the capitalism, the meanness and the relentless get-rich-quick schemes around Australian property.

    • A broken clock is right twice a day - eventually one of these predictions will come true!

    • My brother and I lost 100k combined on a sale this year, looks like it was the right decision

    • property values did collapse following the GFC, only then we had a mining boom to keep the economy afloat and chinese investment to reflate property prices…..which will not be there this time around. The government via the RBA is driving down the cost of borrowed money to keep themselves, the banks, and property debtors liquid….but rates are already near zero and the music has stop playing sometime.

      • I'm waiting for jobkeeper to end to see what happens once the government stimulus is removed entirely. Very interesting times coming march 2021.

        • fiscal support will be continued/renewed until a vaccine is employed and confidence regained in all sectors. To cut job keeper completely and to leave housing out to dry will be the death of the Australian economy. Not saying it cannot happen, but if it does you wont exactly be celebrating the drop in house prices more than everything else you've lost along side.

          • @Kill Joy: I can see your point, but the fact remains we won't be able to continue the fiscal support without inflation happening. Right now the price of most things has gone up, food is a good example, and if we inject more money into the system the result will be even worse. Sure houses will be worth more but everything else will cost more too. Also wages won't go up because no company will allow it in this climate, putting further strain on everyone.

            The only people screwed by house prices dropping are the ones that borrowed way over their means. If you have some equity then yes you wont have as much as you did, but at least it won't be negative if house prices drop.

            I'm not as confident as you that there will be stimulus for another year or two until the vaccine is ready. Even then, we still have no idea if this will be a long term solution or in another six months after everyone is inoculated we go through the whole thing again when a different strain comes out. As we've seen, that's a distinct possibility.

    • They say this dozen of times have not seen it happened. it will just stop increasing for a while but never CRASHED

  • Just a punt but I'm guessing op does not own a house.

  • +101 votes

    News.com.au… You serious?

  • +25 votes

    Don’t worry, the gov will allow non-resident purchasers to prop up the market.

    • They love to help the present, by borrowing from the future.
      Economically started in the late 90's and it'll hit critical mass after 30 years/2025+. Stock up on toilet paper apocalypse ?

    • yeah, but the government recently pissed off the biggest buyer of our tofu housing industry by asking where the did corona virus come from